Italy-German spread widens to 250 points

Milan, other European markets gain on ECB forecasts

Italy-German spread widens to 250 points

Milan, September 5 - Investors grabbed at a glimmer of good news in cautious comments from the European Central Bank Thursday, lifting Milan's leading stock exchange along with most other European financial markets. The FTSE-Mib climbed by 0.78% to close at 16,842 points, partly boosted by a jump of about 8.4% by the value of Telecom Italia following reports that several investors including Egyptian businessman Naguib Sawiris may be interested in buying shares in the company. But the general lift in market sentiment came as ECB President Mario Draghi marginally improved his forecast for eurozone output this year, saying the bank now expects output to shrunk only 0.4% in 2013 rather than the 0.6% contraction previously forecast in June. And while the central bank held its key lending rate unchanged at 0.5%, Draghi also warned that the central bank was reducing its forecast for next year to 1% from the previous 1.1% expected for 2014. Bond markets were stable on the news as the spread between Italy's 10-year bond and its German counterpart widened to 250 basis points, only slightly more than Wednesday's close of 248 basis points. The yield on Italian 10-year paper closed at 4.54%. The spread between lending rates in the two countries is seen as an indication of investor faith in the Italian economy and its ability to cope with a lingering recession. On other European markets, Frankfurt's DAX rose by 0.48% to close at 8,234.98 points, while Paris's CAC 40 gained 0.66% to close at 4,006.80 points, and Spain's IBEX 35 climbed by 0.70% to 8,550 points. In London, the FTSE index of leading British shares gained 0.89% to close at 6,532.44.

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